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The Five Competetive Forces That Shape Strategy.

Essay by   •  March 20, 2019  •  Essay  •  491 Words (2 Pages)  •  65 Views

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Halil İbrahim Eroğlu

20140204022

Assignment 3

THE FIVE  COMPETETIVE FORCES THAT SHAPE STRATEGY

1. Define the five competitive forces that shape strategy in the article?

2. Analyze the higher education industry in which IUE is with respect to these five factors. Which forces are more crucial than the others?

  1. NEW ENTRANTS

The first competitive force is new entrants to the industry. Newcomers come to the market with the love of winning a big market share with them. This poses a negative pressure on prices, costs and necessary investments. Existing companies should lower their prices or increase their invesments to repress newcomers.

  1. POWERFULL SUPPLIERS

The power of suppliers is the second force that shapes strategy. Strong suppliers can keep prices as high as they want, shape their service quality, or shift costs within the industry. There are certain situations in which suppliers have these powers; There is no other product to replace, the supplier is more costly to change, the new supplier will be integrated into the situation in a difficult way.

  1. CUSTOMERS

The power of buyers is the third one. Strong customers will want to get better services and goods by forcing prices. This will force the companies and other competitors. This will lower prices. If there are a small number of buyers, if the products are standardized and if buyers will suffer less damage for changing a dealer, the buyers will be strong.

  1. SUBSTITUDE OFFERINGS

The fourth force is the substitude offerings. Finding  a new product, that is similar to or has similar function to a old a product threatens the sellers seriously. However, this product should has less price than the old one. Substitude offering is more powerful when, if the product has an attractive offer, the cost to switch to the new product is low, or if the companies do not understand each other well.

  1. ESTABLISHED RIVALS

The fifth and last one is established rivals. The most important thing is what they are competing on. If competition is on price, it is the most destructive for companies. This competition directly affects the users positively. When companies compete with the same quality and the same needs, this situation returns to zero sum game. On the contrary, companies will struggle with different services, different prices and different customers.

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